GM shocked South Korea in February with plans to close one local plant and leaving the fate of three others unclear.

GM Korea logo. (Photo: Reuters)

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General Motors Co's president said common ground must be reached on a long-term financial restructuring of GM's South Korean auto unit by next Friday and if there was none, the operation would likely seek bankruptcy protection.

GM shocked South Korea in February with plans to close one local plant and leaving the fate of three others unclear. It is seeking government funding and incentives as well as wage concessions to save the unit, which just posted an annual net loss of $1.1 billion, its fourth straight year in the red.

But the April 20 deadline, first given late last month, looks challenging given growing tensions with the union and as state-funded Korea Development Bank (KDB) says it needs until early May to complete due diligence on GM Korea and the proposed restructuring.

"Our preferred path remains to find a successful outcome here," GM President Dan Ammann told Reuters in an interview. "It's the right thing for all the stakeholders. But everybody has got to come to the table by next Friday."

Complicating matters, GM Korea must make payments to workers who agreed to leave the company as part of a voluntary severance plan in the week beginning April 23. The unit does not have the cash to make the payments, and GM has so far indicated it will not provide any more cash unless there is a deal with unions and the South Korean government.

An interim report on the due diligence will come out on April 20, KDB Chairman Lee Dong-geol told reporters on Friday, adding that meaningful progress in talks can be made after that. KDB owns 17 percent of GM Korea.

While there were early signs that GM Korea's union may be more accommodating than in the past, tensions have flared.

Last week, some union members entered the office of GM Korea's CEO and destroyed furniture as the automaker was unable to make planned bonus payments. Talks with the union on Thursday were cancelled after the company demanded security cameras be set up at the site due to safety concerns.

GM headquarters this week also banned employee travel to GM Korea sites until further notice due to worries about security.

GM has offered to invest $2.8 billion in GM Korea, part of which would be shouldered by KDB. It is also seeking tax incentives and has proposed converting $2.7 billion debt owed to it by GM Korea into equity.

If GM Korea sought protection in South Korean bankruptcy courts, it could continue to build cars. However, it is not clear where the financing to continue operations would come from. The unit's creditors and employees also could take financial hits if GM Korea is restructured in court.

Quitting Korea would, however, not be an easy call for GM as it relies on those plants as a key export hub - building vehicles for the United States and Latin America, although it could build models such as the Chevrolet Trax elsewhere.

GM also uses GM Korea to prepare what is known as "knock down" kits - partially assembled vehicles that are shipped to other markets for final assembly and it has strong relationships with South Korean suppliers that could suffer from a messy exit.

GM has abandoned several money-losing markets over the past three years as part of a broader strategy to boost profit margins and conserve capital to fund electric and automated vehicles as well as new models for core markets in China, the U.S. and Latin America.